Moody’s drops Antenna TV ratings from ‘stable’ to ‘negative’

Moody’s Investors Service has lowered to ‘negative’ from ‘stable’ the outlook on the B1 corporate family rating of Antenna TV S.A. and the B1 rating on the company’s EUR 120 million of 7.25% senior unsecured notes due 2015.

The outlook change reflects the difficult operating environment that the company is facing in its core TV operations in Greece, which is characterised by declining audience shares due to the emergence of new competitors, pricing pressures and
low profitability.

Antenna TV S.A. is the leading television broadcast network and producer of television programming in Greece, it operates Antenna FM (a radio station in the greater Athens area), and also has a 50% interest in Daphne, a publishing company with a portfolio of 13 magazines. Antenna also owns 100% of Nova Television, one of only two private national television networks in Bulgaria and has a franchise agreement with Antenna Cyprus.

Antenna TV’s audience share in Greece for the first nine months of 2006 declined to  17.9% from 20.0% in the same period of 2005, while consolidated EBITD declined by 35% from EUR 18.9 mln to EUR 12.3 mln over the same period. Moody’s said that it has changed the rating outlook to reflect Antenna’s weakly positioned B1 rating, and that further negative pressure could develop over the coming months if Antenna does not strengthen its audience share and restore revenues and profits from its core Greek TV operations to the levels achieved back in 2005.

Moody’s expects that the task of improving audience share and operating performance will prove to be increasingly challenging for Antenna as a result of (i) the lack of visibility in the Greek advertising market, (ii) the current tough competitive environment in Greece, and (iii) the uncertainty regarding the success of the company’s new programming strategy, which is aimed at reaching a new target population of 15-45 years.

However, Moody’s positively notes that growth at Nova Television, the group’s Bulgarian subsidiary, is to some extent offsetting the weakness in the core TV operations in Greece, and that as a result, credit metrics for year-end 2006 are not expected to change significantly compared with a year earlier. Moody’s also notes that the company’s efforts to reduce costs across its operations should help to improve margins going forward.

The rating could come under further downward pressure if the company’s audience shares in its core domestic TV operations fail to stabilise at around 20%, and if revenues and profitability do not return to 2005 levels with the reporting of its second quarter 2007 results. The rating could also be downgraded if Total debt / EBITDA is sustained at levels above 6.0x. At this juncture, upward pressure on the rating is likely to be limited to a stabilisation of the ratings outlook. This is unlikely to occur until there is evidence of sustained improvement of performance in the core domestic operations, while maintaining a strong contribution from Nova and a satisfactory liquidity position. This rating action follows the stabilisation of the Antenna’s outlook in April 2005.